US Report Acknowledges
Peak-oil Threat

It has long been denied that the US government bases any policy around the
idea that global oil production may be in terminal decline.

But a new US government-sponsored report, obtained by Aljazeera.net, does
exactly that.

Authored by Robert Hirsch, Roger Bezdek and Robert Wendling and titled The
Peaking of World Oil production: Impacts, Mitigation, & Risk Management, the
report is an assessment requested by the US Department of Energy (DoE), National
Energy Technology Laboratory.

It was prepared by Hirsch, who is a senior energy programme adviser at the
private scientific and military company, Science Applications International
Corporation (SAIC).

They work extensively on defence and geopolitical issues for clients,
including many for the US government.

Advisory roles

Among current job openings at SAIC are positions at Fort Benning (formerly
School of the Americas) and a private military contract to help retrain the
Albanian air force in Tirana.

Hirsch has held a wide variety of positions in the US energy hierarchy
including senior energy analyst at the Rand Corporation, through to a
presidentially appointed assistant administrator for solar, geothermal and
advanced energy systems.

He has also previously worked for the US Department of Energy on numerous
advisory committees, including the DoE Energy Research Advisory Board.

This new report follows on from two presentations by Hirsch last year. One on
1 March to the same National Energy Technology Laboratory and another on 14 June
last year at the Annapolis Centre for Science Based Public Policy. Here Hirsch
laid down his ideas on the peak of oil production.

The Annapolis Centre for Science-based Public Policy is a group which has
received $658,000 in funding from Exxon Mobil since 1998. It openly disputes the
idea that global warming is the result of burning fossil fuels.

But this brand new senior-level report on “peak oil” is unprecedented in US
government circles. It is not just the existence of the report itself that is
such a landmark in the current oil debate. Its conclusions also pull no
punches.

Uncertain timing

“World oil peaking is going to happen,” the report says. Only the “timing is
uncertain”.

The effects of any oil peak are similarly not ignored. Specifically, the
impact on the economy of the United States. “The development of the US economy
and lifestyle has been fundamentally shaped by the availability of abundant,
low-cost oil. Oil scarcity and several-fold oil price increases due to world oil
production peaking could have dramatic impacts … the economic loss to the United
States could be measured on a trillion-dollar scale,” the report says.

The authors of the report also dismiss the power of the markets to solve any
oil peak. They call for the intervention of governments. But also they rather
worryingly point to a need to exclude public debate and environmental concerns
from the process. They say this is needed to speed up decision-making.

“Intervention by governments will be required, because the economic and
social implications of oil peaking would otherwise be chaotic. But the process
will not be easy. Expediency may require major changes to … lengthy
environmental reviews and lengthy public involvement.”

Hirsch notes, despite arguments from the major oil companies and producer
nations, that new finds of oil are not replacing oil consumed each year. Despite
the advances in technology, reserves are becoming increasingly difficult to
replace.

Three scenarios

The report sees “a world moving from a long period in which reserves
additions were much greater than consumption, to an era in which annual
additions are falling increasingly short of annual consumption. This is but one
of a number of trends that suggest the world is fast approaching the inevitable
peaking of conventional world oil production”.

The report then takes three possible scenarios and outcomes. Firstly that
energy replacement solutions, or “mitigation” as the report states, are started
20 years before any “peak”. Secondly that solutions are only enacted 10 years
before any peak and, thirdly, that solutions are only put into practice as the
peak becomes apparent.

In what some may see as an optimistic assessment, the authors believe 20
years is enough time to limit damage from any peak. However, they point out that
“if mitigation were to be too little, too late, world supply/demand balance will
be achieved through massive demand destruction”.

Demand destruction is a modern way of saying catastrophic recessions and
shortages. But as well as these predictions, the report lays out “signals” it
believes will be apparent in the run-up to any peak. This is perhaps the most
worrying aspect of the report, as it seems to describe the very events that are
taking place at the moment.

Supply insecurity

“As world oil peaking is approached, excess production capacity … will
disappear, so that even minor supply disruptions will cause increased price
volatility as traders, speculators, and other market participants react to
supply/demand events,” the report says.

“Simultaneously, oil storage inventories are likely to decrease, further
eroding security of supply, aggravating price volatility, and further
stimulating speculation … oil could become the price setter in the broader
energy market, in which case other energy prices could well become increasingly
volatile and unpredictable.”

The report highlights a series of ways to minimise any impacts. From
increased fuel efficiency to technological help in stopping the practice of
“oil-left-behind” or non-extractable oil and various forms of new liquid fuels,
liquefied coal and gas-to-liquids.

But in its conclusion the report makes troubling reading, noting that “the
world has never faced a problem like this. Without massive mitigation more than
a decade before the fact, the problem will be pervasive and will not be
temporary. Previous energy transitions were gradual and evolutionary. Oil
peaking will be abrupt and revolutionary.”

This report is the clearest signal yet that the U.S government is taking the
subject of “peak oil” seriously. Yet it remains to be seen what actions can be
taken to stop this potentially “revolutionary”
change.